A place-based portfolio structure could provide a long-term sustainable funding source and empower local communities to enhance the value of their local MPAs. Under this model, the MPAs are transferred, typically via a long-term lease, to a charitable trust, with the principal activities managed by a dedicated social
enterprise. The Trust is responsible for protecting the assets for public benefit, and the social enterprise is set up to receive income from the Trust, run the assets on the Trust’s behalf and carry out commercial activities in accordance with the Trust’s mission. The Trust will be an independent organisation made up of a board of stakeholders, who make the Trust’s management decisions. This model provides a potential solution to the large number of stakeholders currently involved in implementing and overseeing MPA management measures in North Devon, as the social enterprise convenes all parties to coordinate management measures that are not required by statutory bodies. Funds are generated through an endowment (a permanent fund) raised within the charitable trust, which is placed in an investment fund where it is managed for long-term growth by generating returns independently of MPA activities. Income generated is used to cover the cost of MPA management and invest in new revenue generating opportunities within the MPAs.
The endowment could be raised (within 12-18 months) through collating multiple sources of finance from established and emerging sources (for example traditional business revenues, voluntary giving schemes, biodiversity offsets, nutrient trading schemes and so on). A key benefit of this model is that it provides the
of funding sources to sustain MPAs in the long-term. A more focused approach could be developed to nurture and train volunteers and provide the local community with an increased stake in their MPAs.
This model is relatively complex to set up, requiring funding to secure an endowment and a team with appropriate skills to ensure long-term sustainability. However, there are several examples of this model operating successfully terrestrially, for example, Milton Keynes parks were transferred into an independent charitable trust to become entirely self-financing and deliver enhanced community benefit. A similar framework is being developed to roll this model out at scale to parks in cities across the UK, with a pilot in Newcastle due to be launched in early 2019. In a marine context, Conservation Trust Funds have been implemented successfully in nearly all Caribbean islands to handle money from diverse sources and bring together stakeholders with varying capabilities and interests (JNCC, 2017). Figure 3 illustrates this financial structure below.
Figure 3. Place based portfolio model structure
Source: Vivid Economics, Environmental Finance
Model description
1 – Public bodies transfer assets/liabilities typically via a long-term lease from the MPA into a Holding Vehicle, for example a Charitable Trust, which is managed by a new social enterprise.
In this context, assets and liabilities are defined as the rights to license the MPA revenue opportunities and the cost of managing the MPA, respectively.
2 – Public and other funders contribute towards an endowment held in the charitable trust to secure public benefits.
3 – Charitable trust releases income from endowment to a social enterprise, which manages assets in the MPA, engages community, generate revenues and delivers benefits.
4, 5 – Investors invest into the enterprise (or third-party businesses operating in the MPA portfolio), which manages the MPA to deliver environmental benefits and generate financial returns to repay investors. This enterprise model is available only if the transferred portfolio includes opportunities to license revenue.
6 – MPA businesses pay a rent or a license fee to the enterprise.
Source: World Bank (World Bank, 2017)
Source: Milton Keynes Parks Trust (Milton Keynes Parks Trust, n.d.)
Table 2 below provides a summary assessment of this financial model.
Table 2. Place based portfolio model assessment
Feasibility Socio-economic impacts Track record Robustness of the model
— Solves local authority problem of lack of resources to manage assets.
— Requires public bodies to contribute capital and funding to an endowment. Time and set up costs likely to be high.
— Requires staff with technical expertise for effective management.
— Supports
communities to take responsibility for assets, leading to increased engagement and participation.
— Allows the creation of balanced portfolio of assets and liabilities, supporting public goods with private services.
— Conservation Trust Funds have been implemented in nearly all Caribbean islands, both regionally and in groups, e.g. the Caribbean Biodiversity Fund (2012) received a large principal endowment and works regionally to disburse funding to MPAs to supplement government funding.
— The Milton Keynes Parks Trust (1992) manages parks independently from authorities using endowment income and revenues from operations.
— Long-term blended funding solution and new strategic imperatives enables assets to be repurposed for revenue generation and delivery of impact.
— An entirely new model requires transitional funding and may not be financially sustainable if funds run out prematurely or are mismanaged.
— However, if the initiative fails, MPAs will likely have a partial endowment and/or more enterprise revenues than the current status quo.
Source: Vivid Economics, Environmental Finance
Case study 1: The Caribbean Biodiversity Fund (endowment only)
The Caribbean Biodiversity Fund is a regional endowment fund established to disburse funds to Caribbean countries to support terrestrial and marine protected area management. It was launched in 2012 by The Nature Conservancy, the Global Environment Facility and The German Development Bank (KfW) with US$34.4m available for sustainable financing, including $2.4m in generated income. Achievements of the Fund include: establishment of five national trust funds to receive funds from CBF; water quality improvement and a methodology for
protected area managers to use drones to collect special data on MPA; and a monitoring information database to track the impact of interventions in the marine environment.
Case study 2: The Milton Keynes Parks Trust (endowment and enterprise)
Milton Keynes Parks Trust is an independent charity created in 1992 to manage many of Milton Keynes’ parks and green spaces in perpetuity. It was established with the vision that the city’s parks and green spaces would be better managed independently from the local authority without having to compete with other council priorities and funds. The Trust was endowed with a substantial property and investment portfolio, which generates income to cover the annual maintenance costs. The Trust focuses on continually improving its parks, developing new enterprises and income streams, and delivering enhanced public benefits. It organises over 200 events each year, provides environmental education programmes for schools and supports a team of around 160 volunteers.
A Marine Improvement District (MID) could achieve a new source of sustainable income to maintain and improve the quality of MPAs by securing a voluntary levy from businesses operating in the local area. The model builds on the terrestrial concept of a Business Improvement District (BID), which has been established successfully to improve the local trading environment in town centres and other localised areas across the UK.
A MID would be established through securing a majority vote from businesses through a ballot process to invest collectively in local improvements in addition to services already being delivered by local statutory bodies. If a levy can be secured on business rates, this would enable a significant new source of income to pay for the annual costs and/or build a long-term endowment. This can be used to invest in MPA assets, coastal infrastructure and support other underlying revenue generating activities that will benefit businesses in the local area. The model is based on the idea that a group of aligned enterprises working together can benefit from having an improved local environment, through the encouragement of more visitors to the area and their associated additional spending.
The key challenge to implement this model is evidencing and educating enterprises about the collective benefits they receive from high quality MPAs in their area. The model requires leadership to engage with local enterprises and provide a clear rationale for agreeing to a voluntary levy. A potential alternative model could be to establish an Enterprise Zone, designed to strengthen economies in deprived areas through supporting businesses with government benefits, including business rate discounts and enhanced capital allowances. Another variant could be a voluntary visitor giving scheme or a tourism MID, where a levy is charged on a percentage of revenues generated by certain tourist services to support development of tourism in the local area. A tourism MID may be more feasible if it is difficult to align broader business interests, however, it may prevent the wider increase in the sense of community and the broad benefit that a business- led MID can achieve across the trading environment. Further consultation is required among businesses operating in North Devon to establish the most appropriate structure to implement. Figure 4 illustrates this financial structure below.
Figure 4. Marine Improvement District structure Source: Vivid Economics, Environmental Finance
Model description
1 – A MID could be set up using Business Improvement District regulations to secure funding for MPAs from a levy charged on local businesses over a 5-year period.
2 – The levy can be invested in an endowment, thereby creating a provision to maintain MPAs.
4 – The levy is ring-fenced to develop local projects that provide improvements to the area.
5 – This increases tourism visits and spend, and benefits local enterprises.
Source: Newquay Business Improvement District (Newquay BID, 2015)
Table 3 below provides a summary assessment of this financial structure.
Table 3. Marine Improvement District model assessment
Feasibility Socio-economic impacts Track record Robustness of the model
— Difficult to secure a majority vote from businesses in favour of the levy: businesses must see clear benefit from improvements made to MPAs.
— Clear definition of geographical area required.
— Skills and expertise in business engagement and BID management required.
— Potential to improve MPA quality and expand range of activities and users to enhance economic vitality.
— More engagement with potential supporters and sponsors.
— >290 BIDs established in UK town centres with proven impact.
— Bryant Park, New York (1988): Parks improvement district successfully funded the restoration of neglected green space.
— Loch Ness and Inverness Tourism BID (2014):
branding and promotion of the area as a tourist destination.
— No track record of BIDs focused on MPAs.
— Robust if the levy can be secured: provides a significant new source of income to enhance revenue-generating opportunities and to establish an endowment as a long-term funding source.
— Development support may come from other grants/public funding.
— BIDs take ~2 years to develop with a term of 5 year; risk that it will not be renewed after 5 years.
Source: Vivid Economics, Environmental Finance